Business Context and Reporting Period
This Form 8-K Current Report was filed by KKR & Co. L.P. on February 23, 2011, covering events occurring on February 16, 2011, and February 22, 2011. The filing primarily addresses the entry into a new material definitive credit agreement, the announcement of financial results for the fourth quarter and full year ended December 31, 2010, and corporate governance updates including a new director appointment and executive equity grants.
Key Financial Metrics and Debt Structure
The filing details a new senior unsecured multicurrency revolving credit facility with an aggregate principal amount of $700 million. The facility has a five-year term and is available for general corporate purposes. Interest rates are set at LIBOR plus 50 basis points or an alternative base rate, with a facility fee of 5 basis points per annum on the total commitment.
Specific financial results for the fourth quarter and year ended December 31, 2010, are referenced in a press release (Exhibit 99.1) but are not detailed within the text of this 8-K filing. Consequently, specific values for revenue, profit, cash flow, and margins are not provided in this document.
Material Changes and Covenants
The new Restated Credit Agreement supersedes the existing credit agreement dated February 28, 2008. Key material terms include:
- Leverage Covenant: The company must maintain a maximum consolidated leverage ratio (total indebtedness to Fee Related EBITDA) of no greater than 4.0x.
- Assets Under Management: The company must maintain at least $25 billion in Fee Paying Assets Under Management.
- Covenants: Customary affirmative and negative covenants limit the ability to incur additional indebtedness and create liens.
Guidance, Outlook, and Corporate Events
Management Commentary and Risks: The filing notes that the effectiveness of the new credit agreement is subject to customary closing conditions to be satisfied by March 9, 2011. Borrowings are guaranteed by KKR & Co. L.P., KKR Group Finance Co. LLC, and general partners of material private equity funds.
Corporate Governance: Thomas M. Schoewe was appointed to the Board of Directors of KKR Management LLC, effective March 14, 2011. He will serve on the Audit and Conflicts Committees and receive a prorated annual cash retainer of $75,000 plus $25,000 for Audit Committee service.
Executive Compensation: On February 16, 2011, KKR Holdings L.P. granted units to named executive officers: Todd A. Fisher (108,392 units), William J. Janetschek (29,021 units), and David J. Sorkin (31,819 units). These units vest over four years in 25% increments starting April 1, 2012, and are exchangeable for common units on a one-for-one basis.
Investor Verification Checklist
- Verify the specific revenue, net income, and cash flow figures for Q4 and FY 2010 in the press release furnished as Exhibit 99.1, as these are not included in the 8-K text.
- Confirm the satisfaction of closing conditions for the $700 million credit facility by the March 9, 2011 deadline.
- Monitor the company's ability to maintain the 4.0x leverage ratio and $25 billion Fee Paying Assets Under Management covenant thresholds.
- Review the vesting schedule and performance conditions associated with the executive unit grants detailed in Item 8.01.